RIAs See Continued Growth Trajectory Ahead, with More Than Half Believing the RIA Industry Will Grow at a Faster Rate Than the Market

Seeking to lock in growth and prepare their firms for ongoing success, RIAs are placing emphasis on using technology to create better client experiences, investing in their people, and hiring a more diverse workforce

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"Whether it is the latest automated investment technology or the growing dominance of mobile and cloud-based solutions, we are committed to helping RIAs understand and deploy the technologies that will have the greatest impact for their business."

LAGUNA NIGUEL, Calif.--(BUSINESS WIRE)--Independent registered investment advisors (RIAs) have a pronounced
sense of optimism about the state of the industry, their firms and the
future, according to the latest Independent Advisor Outlook Study
(IAOS) from Charles Schwab. RIAs report that the bull market of the
past six years has contributed positively to firm growth across areas
including attracting new clients (23%), providing higher advisor
compensation (16%), creating more capital to invest in firm growth and
operations (13%), and driving the consolidation of client assets (13%).
From this position of strength, 93% of RIAs believe the industry is on a
continued growth trajectory, with more than half (53%) saying the
industry has not fully matured and will continue to grow at a faster
rate than the market.

The IAOS results reflect responses from 629 RIAs representing
$229 billion in assets under management (AUM) custodied with Schwab and
found that advisors are taking steps across a range of strategic and
operational fronts to support their growth and set their firms up for
success in the future. Looking at the next five years, the top three
priorities for growth are adoption and integration of new technology,
differentiation of their firms in the market, and adding staff.

“The independent model is resonating with both investors and with
advisors, and this is driving the dramatic growth we have witnessed to
date and expect to continue in the decade ahead,” said Bernie Clark,
executive vice president and head of Schwab Advisor Services. “It’s
clear that the environment in which we operate is changing. From
emerging clients and the next generation of advisors, to new
technologies that change the way firms work, RIAs have the opportunity
to capture an increased share of the affluent market and to take
decisive actions now to lay the groundwork for their firm well into the
future.”

Advancements in technology help firms create a better client
experience

The study found that technology is helping advisors deliver a better
client experience (70%), is creating efficiencies that are making firms
more profitable (67%), and is freeing advisors to spend more time with
their clients (64%).

With an eye towards automation in the workplace, nearly half of firms
said they would most likely use automated investment management to
target younger, next generation investors (48%) or investors with under
$100,000 in investable assets (43%). According to respondents, the
benefits of using an automated investment management solution include
being able to serve clients with lower minimums (29%) and being able to
reduce the cost to serve certain clients (19%).

“Strategic plans for today’s RIAs are not complete without strong
consideration for the role of technology - not only in helping to
attract a new generation of clients, but also as a driver of competitive
and differentiated client service helping to build business scale and
efficiencies,” said Clark. “Whether it is the latest automated
investment technology or the growing dominance of mobile and cloud-based
solutions, we are committed to helping RIAs understand and deploy the
technologies that will have the greatest impact for their business.”

Firm services – opportunities for differentiation

The study also found that differentiating firm services may be an
opportunity for advisors. While a majority of firms believe that they
offer holistic wealth management (77%), the findings indicate a range of
views regarding the definition of holistic wealth management. For most,
investment management (97%), tax-efficient planning (77%) and long-term
financial planning (76%) typically make up a firm’s core offer to
clients. Services such as financial planning for children, estate
planning, charitable planning, and health care planning are more likely
to be considered value-added services by advisors.

Hiring and creating a diverse workforce is increasingly important

Advisors have reported client retention rates of 97% in past studies,
and the latest IAOS findings indicate that RIAs are experiencing
high employee retention rates as well, specifically in the areas of
business development and investment professional roles (both 98%).
Additionally, more than half of all firms are currently hiring, with
larger firms ($500 million or more AUM) reporting more aggressive hiring
plans (79%) than smaller firms (54%).

Across firms of all sizes, adding staff in operational and support roles
is the top talent acquisition priority. For larger firms, this is
followed by bringing on junior advisors (23%), whereas for smaller firms
there is an equally important focus on hiring individual tenured
advisors (17%). While firms are experiencing high employee retention
rates, they are reporting that it is more challenging finding business
development roles (19%) and investment professionals (16%).

As they seek to add staff, 57% of advisors consider creating a more
diverse workforce (i.e., age, gender and race) as a priority, including
28% who report they have already taken action to hire diverse employees.
In order to attract more diverse employees, close to half of advisors
(44%) are expanding their networks to identify diverse candidates.

Investing in people – equity ownership, training, and development

Data from the survey shows that advisors are increasingly making
investments in their people in multiple ways. Nearly one-third of firms
(30%) offer equity ownership opportunities to their staff and nearly
half (49%) have a documented path to ownership, one that typically
results in equity owners buying in (57%). Among firms offering equity
ownership, 93% believe employees with an equity share are more likely to
grow with the firm. Firms that offer ownership do so to ensure the
long-term success of their firm (46%) and in order to retain the best
talent (42%).

Equity ownership opportunities are increasingly more likely as a firm’s
AUM grows – firms with more than $100 million are two and half times as
likely as those under $100 million to offer equity ownership. Larger
firms ($500 million or more) currently offer equity ownership more often
than smaller firms (52% vs. 21%), but 37% of smaller firms report that
they are looking into offering equity ownership in the future.

Informal, on-the-job training is the most common approach to training
staff (88%), but firms are also supporting additional education and
certifications for staff (66%) and a third of firms offer a formal
in-house training program (33%). RIAs identified the biggest development
needs among their staff as business development skills (26%) and
training to be able to fully leverage technology in workflows (20%).

“Attracting, growing and keeping clients is directly linked with a
firm’s ability to first put together the right client teams – teams that
reflect the diversity of the firm’s client base, and that bring a
powerful combination of high touch relationship and technical skills.
Based on these results, it’s clear that firms believe that it is also
critical to keep these individuals invested in serving clients and
engaged in the firm over the long term.”

The Independent Advisor Outlook Study, conducted for Schwab
Advisor Services by Koski Research, has a 3.9% margin of error. Koski
Research is not affiliated with nor employed by Charles Schwab & Co.
Inc. All data are self-reported by study participants and are not
verified or validated. Advisors participated in the study between April
28 and May 11, 2015.

About Charles Schwab

At Charles Schwab we believe in the power of investing to help
individuals create a better tomorrow. We have a history of challenging
the status quo in our industry, innovating in ways that benefit
investors and the advisors and employers who serve them, and championing
our clients’ goals with passion and integrity.

Schwab Advisor Services™ serves independent investment advisors and
includes the custody, trading, and support of Charles Schwab & Co.,
Inc.,Member SIPC. Independent investment advisors and Schwab are
independent of each other and are not affiliated with, sponsored by,
endorsed by, or supervised by each other.